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The Minnesota House took a big vote on Thursday that could bring major regulatory changes for short-term payday loans out of concern that interest rates are too high, thus taking advantage of people in need.

The lending practices at the center of the debate are the short-term, under-$1,000 loans that people often take out in emergencies, but the fees can top 350 percent of the original loan.

JEFFERSON CITY, Mo. (AP) Missouris House on Tuesday passed a bill that would change the payday loan industry, a measure supporters called true reform designed to protect borrowers of the small, unsecured loans while opponents denounced it as a sham that would do nothing to help people escape debt.

House members voted 112-39 in favor the bill that would eliminate renewals on payday loans and lower the amount of interest lenders can charge. The measure heads tothe Senate, which passed a similar bill earlier this year.

Under current law, loans can be renewed up to six times and lenders can charge up to $75 in fees for a $100 loan. Payday loans can be up to $500 and last from 14 to 31 days.

The House bill would eliminate loan rollovers and cap interest and fees at 35 percent of the initial loan amount. Lenders also would be required to conspicuously post in their lobby the amount of fees and interest charged per $100 loaned.

If you want to see reform to the payday loan industry, you will vote for this bill, said Rep. Sandy Crawford, R-Buffalo. It addresses all the major issues.

Opponents said the bill doesnt solve the problem of borrowers securing loans from multiple lenders at the same time. They argued for more restrictions on lenders to ensure they arent loaning money to clients who cant afford the interest and fees.

The bill is a wolf in sheeps clothing that will keep people trapped in debt and moving into bankruptcy to the detriment of all of us, said Rep. Jill Schupp, D-Creve Coeur.

The House and Senate must now agree on an identical version of the bill before lawmakers adjourn May 16.

The key difference between the two versions is the cap on interest and fees. While the House bill would lower the current limit to 35 percent, the Senate version would remove the cap altogether. The Senate sponsor said market rates should determine the interest on a loan.

Both versions of the bill would allow borrowers to sign up for additional time to pay back a loan without penalty. Lenders only would be required to provide brochures and notices about the plans availability, but it would up to the borrower to invoke the option before the loans maturity.

Borrowers could only enroll in the no-penalty extended payment plan with an individual lender once every 12 months.

There were 934 licensed payday loan lenders in the state in 2012, according to the Missouri Division of Finance. The division estimates that between October 2011 and September 2012, there were 2.34 million loans issued with an average value of $306 at an average interest rate of 455 percent.

Suffice to say, I got a few angry responses after my last piece on student debt. Which is understandable: When you argue that its perfectly fine for the government to make billions in profits off loans to graduate students, a few peoplenamely, indebted graduate studentsare going to take umbrage. And since I plan to write about education finance pretty frequently in this space, I wanted to spell out my point in a little more detail.

Posted in Loans | Tagged loans | Comments Off on Do Graduate Students Deserve Dirt-Cheap Loans?

Payday loans are small loans marketed as a quick, easy way to tide borrowers over until the next payday. However, the typical payday loan borrower is indebted for more than half of the year with an average of nine payday loan transactions at annual interest rates over 400 percent, according to the Center for Responsibile Lending.

LOS ANGELES, Calif. – In a story April 22 about Discover Financial earnings, The Associated Press reported erroneously that the company plans to launch a direct checking service next year. The service is planned for this year. The error was left in the story due to a technical glitch.

Discover Financial Services net income fell 6 per cent in the first three months of the year as the company set aside more money to cover potential loan losses, offsetting loan growth.

The credit card issuer and lender said Tuesday that total loans grew 6 per cent in the first quarter from a year earlier. Personal loans jumped 27 per cent, while private student loans rose 5 per cent. Credit card loans increased 5 per cent, while sales volume for the companys namesake card rose 3 per cent.

During a conference call with Wall Street analysts, Discover Chairman and CEO David Nelms said he feels good about the pace of card loan growth in the first quarter, but would like to see more of a pickup in card sales growth. He said card sales growth might rise if retail sales increase.

Wall Street is watching results for Discover and other card issuers to gauge how the US economy fares following an unusually bitter winter that sent factories, hiring and consumer spending into hibernation.

Recent data show consumers started spending more toward the end of the first quarter. US retail sales rose last month by 1.1 per cent.

Discover has also been working to expand its credit card business, adding features like free credit scores on cardholder statements. It also plans to offer student loan consolidation and direct checking later this year.

Discovers payments services business didnt fare as well in the latest quarter, however. Pretax income plunged 40 per cent even as transaction dollar volume grew 4 per cent. Both Discover and American Express are pushing into the payments processing business, where they compete with Visa and MasterCard, payment processing networks that dont issue credit cards or lend money.

All told, Discovers profit after paying preferred dividends was $618 million, or $1.31 per share, in the three months ended March 31. That compares with $659 million, or $1.33 per share, in the prior-year quarter.

Loan growth helped drive revenue net of interest expense up about 4 per cent, to $2.08 billion from $1.99 billion.

Analysts polled by FactSet expected earnings of $1.25 per share on $2.11 billion in revenue.

The companys latest results included a provision for potential loan losses of $272 million, up from $159 million a year earlier.

Last week, American Express reported better-than-expected first-quarter earnings growth, reflecting increased spending by its cardholders. Capital One Financial, meanwhile, posted a slight increase in first-quarter profit. But the credit card issuer and lenders revenue declined as US card-related loans declined.

Shares in Riverwoods, Ill.-based Discover ended regular trading down 10 cents at $56.67. The stock fell another 97 cents, or 1.7 per cent, to $55.70 in after-hours trading.

A POSTMAN has been jailed for stealing cash cards and emptying people’s bank accounts.

Damon Alvey, of Friday Court, Thame, helped himself to post between June and October last year after he was moved by Royal Mail from Oxford to their Banbury sorting office.

The 45-year-old used his job to search for letters containing bank cards and PIN numbers, which he used to withdraw at least £4,033 from two customers’ accounts.

He pleaded guilty to one count of theft and four counts of fraud by false representation.

Timothy Boswell, prosecuting yesterday at Oxford Crown Court, said Alvey had also taken letters belonging to 15 other people and police found the remains of more post that had been shredded when they searched his home.

Mr Boswell said one of his victims was Darren Blythe, 34, of Bretch Hill, Banbury, who is registered blind and receives around £400 a month from the local authority.

Speaking after the hearing he said when he realised all the council money had been stolen, plus about £2,700 from another account, he was left feeling sick. He said: Without that money I wouldn’t be able to afford to do anything. I wish he had got a longer sentence.” Timothy Greaves, defending, said his client had been a postman for three-and-a-half years but turned to crime after he got into £25,000 of debt.

“St. Louis continues to be one of the top commercial loan markets for UMB,” he said, with 28.3 percent year-over-year loan growth in the first quarter. Loans for equipment purchases have been especially strong. “As always, competition remains strong in the St. Louis area, but we continue to stay competitive on our loan rates and terms.”

UMB in St. Louis also was a big contributor in fiscal 2013, with loan growth of 40 percent.

UMB Financial Corp., based in Kansas City, Tuesday reported a profit of $23.4 million in the first quarter, 33 percent less than a year earlier, due in part to acquisition-related costs.

Shoptalk, Banking, Economic development

Posted in Loans | Tagged loans | Comments Off on St. Louis continues to drive loans for UMB

She said Metro Bank repeatedly passed her to different departments and failed
to call back when promised. She was forced to make multiple lengthy calls to
the UK to chase up her complaint, racking up a large mobile phone bill.

During one conversation on March 17 the day before the changes were
introduced a Metro Bank manager said the couple could transfer money to
their Australian bank accounts. This would allow them to access more than
their daily withdrawal limit of pound;300 and avoid the new fees. He promised to
waive the pound;17.50 international transfer fee.

Miss McCormick transferred pound;2,000 and Mr Taylor transferred pound;1,750. Crucially,
however, Metro Bank did not tell the couple that the exchange rate for
transfers in sterling is set by the receiving bank, so could be
significantly worse than the rate for cash withdrawals.

When they checked their accounts they found they were charged a rate of around
AU$1.75 for the transfer. This compared to the AU$1.83 they would have got
through their Metro Bank cards for cash withdrawals on the same day. As a
result the transfer left them around pound;162 worse off before fees.

Withdrawing pound;3,750 in cash would have cost just over pound;84 in fees if spread
across a week to keep within the daily withdrawal limit.

In addition, the pound;17.50 international transfer fee, which Metro Bank promised
to waive, was charged to Mr Taylors account.

Miss McCormick said: Metro Bank did not explain that if the transfer was in
pounds sterling the receiving bank would apply its own exchange rate to
convert it into Australian dollars. Had we been given all the relevant
information we would clearly have investigated the exchange rates our
Australian bank was offering and opted for withdrawing cash as this would
have been the cheapest option.

Metro Bank launched in 2010 as a challenger to the big four high street banks.
It claimed to provide unparalleled customer service. Its American founder,
Vernon Hill, said this means fulfilling customer needs, even anticipating
them.

Miss McCormick said: This series of events has been stressful and upsetting
for both of us. It is difficult to contact Metro Bank in normal office hours
because of the time difference and staff have repeatedly failed to return
our calls, so weve been forced to spend a considerable amount on
international calls.

We find it difficult to understand how Metro can make changes to a product we
purchased specifically for its free international usage, especially when we
have no alternative or option to change products now that we are abroad. We
still have four months of our trip left and these additional charges will
impact on how we are able to handle money on a daily basis.

Following the Telegraphs intervention, Metro has offered the couple pound;200 in
compensation, plus pound;80 to cover the cost of calls and refunded the pound;17.50
international transfer fee.

A spokesman said: We pride ourselves on offering the best in service and
convenience to our customers, and were very sorry if Miss McCormick and Mr
Taylor dont feel like weve lived up to this promise.

He insisted all customers were notified of the fee changes on January 7. This
is not a decision weve taken lightly, he said. We recognise that while
only a small number of our customers transactions are affected by the new
fees, this is something that some of our customers feel strongly about.

The best cards for spending abroad

A handful of cards give you low-cost access to your money abroad.

The Halifax
Clarity credit card has no foreign exchange fees no matter where you
use it and the exchange rates are good. It offers free cash withdrawals but
you will be charged interest on them at 12.9pc even if you pay off the
balance in full. This works out at around pound;1 a month for every pound;100
withdrawn.

If you want a debit card and are prepared to move your bank account, Norwich
and Peterborough Building Societys Gold
Classic current account has no spending or cash withdrawal fees
worldwide. To avoid a pound;5 monthly fee you must pay in pound;500 every month or
keep a balance of pound;5,000 in the account.

The third option is a prepaid card that you load up before you travel then use
as a debit card abroad. The exchange rate is set on the day you load it up,
so there are no surprises. FairFX
has a prepaid card that comes in euros, US dollars or sterling. If you spend
in the chosen currency there are no transaction fees, but if you use it for
other currencies a 1.4pc fee applies. Cash withdrawals cost euro;1.50 or US$2.

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Cash Store Financial Services Inc. filed for bankruptcy protection on April 15, 2014. Court documents show they are losing $2 million per week, and have well over $100 million in debt.

I will start by stating my biases: I am not a fan of payday loans. I believe they are a very expensive form of borrowing, and in almost all cases the borrower has better options.

Ive heard the sales pitch: rent is due tomorrow but payday is a week away, so get a payday loan now! It only costs $21 on $100! Twenty-one dollars on $100, on a two-week loan, averages out to an annual interest rate of well over 500 per cent! Do you really want to pay the loan back five times every year?

Obviously a better option would be to save money so you can pay your rent, but if you really are in a bind and have no family or friends who can help, would it not be better to talk to your landlord and ask for a few extra days to pay the rent?

In their court filings Cash Store says they serve individuals for whom traditional banking may be inconvenient or unavailable.

All Canadian banks offer 24/7 on-line banking, and many banks are open evenings and weekends, with longer hours than the Cash Store, so Im not convinced traditional banking is inconvenient.

I read through the over 500 pages of court documents, and there was one sentence that really explained the issue, and offers a valuable lesson to all borrowers:

Since Cash Store is unable to make new loans in Ontario, its ability to collect outstanding customer accounts receivable has also been significantly impaired.

In other words, The Cash Store is having the same cash flow problems as the clients they purport to help. With no new cash coming in, they cant pay the bills. For The Cash Store however they have a double problem:

No new loans means no new interest and fee income

No new loans means existing customers are not paying back their old loans.

The Cash Stores customers can only repay their loans if they can get a new loan to repay the old one! Now that the Ontario government has shut them down, they cant make new loans, so they cant collect the old ones.

Think of it like this: its the equivalent of losing your job (future income) and having your bank account frozen (so you cant get at what you have).

Heres where I lose sympathy. My biggest problem with payday loans is that they create a vicious cycle. I borrow $500 today and have to pay back $600 next payday, but when I get paid I need money for food and rent. That means I can only pay back the first payday loan if I get a second one. Its easy to see where that cycle leads, as you must continually borrow from one payday loan to payback another.

In many cases the cycle only ends with bankruptcy.

Twelve per cent of people who go bankrupt owe money on a payday loan, and when they go bankrupt they have, an average, not just one but three loans outstanding. Worse, they owe in total almost $2,500 on payday loans which is almost an entire paycheque.

Thats the problem: one payday loan leads to another. You cant stop at just one. Relying on credit to makes ends meet, just increases your dependence on credit.

The Cash Store is under bankruptcy protection primarily because the Ontario government broke the cycle of borrowers repeatedly borrowing to pay back previous loans, by not allowing the Cash Store to make new loans.

I started by saying Im not a fan of payday loans, so perhaps I am being overly harsh. Are payday lenders the only lenders that encourage this vicious cycle?

Probably not.

Ask yourself this question: have you ever used a cash advance on a credit card to make your payment on another credit card? Have you ever used your line of credit to pay your mortgage or car loan?

Its not just payday lenders that rely on borrowing from Peter to pay Paul. All banks encourage the same practice. Thats why banks dont mind that you already have one or two credit cards when you apply for a third one with them. They understand the game.

Unfortunately for you, the cost of playing this game is a lot of interest payments, so the lesson is obvious: only borrow if you have the cash flow to repay the loan without the need to continue to borrow.

Stop the vicious cycle, and keep your money in your pocket (unless you really want the bankers to have it).